The insurance industry is one of the areas which have been highly disrupted by the emergence of artificial intelligence. For example, the underwriting process, which involves assessing the risk of insurance applicants and determining whether to provide insurance, has been predicted to become significantly faster as machine and deep learning models, powered by a dramatic increase of consumer data, facilitate the automation of the process. The following articles address this disruption in detail: McCurry, J., “Japanese company replaces office workers with artificial intelligence”, The Guardian, January 5, 2017. Balasubramanian, R., A. Libarikian, & D. McElhaney, “Insurance 2030—The impact of AI on the future of insurance”, McKinsey & Company, 2021. Consider Bruno who manages an underwriting team in an insurance firm. Recently, the management of Bruno’s firm informed him of their decision to create a new risk assessment team, consisting of data scientists with machine learning expertise, and reduce the size of Bruno’s underwriting team. Bruno’s underwriting team will now work with the new risk assessment team in order to determine whether to provide insurance to applicants. Question 4 Use the model of a firm’s technology choice and graphically illustrate the management’s restructuring decision in a diagram with isocost curves. Your diagram should have the amount of human intelligence on the horizontal axis and the amount of artificial intelligence on the vertical axis. Fully label your diagram. Note that there are no actual numbers given in this question: you may make them up or simply use appropriate notations. Briefly explain the key information of your diagram.
PART 2 ARTIFICIAL INTELLIGENCE
The insurance industry is one of the areas which have been highly disrupted by the emergence of artificial intelligence. For example, the underwriting process, which involves assessing the risk of insurance applicants and determining whether to provide insurance, has been predicted to become significantly faster as machine and deep learning models, powered by a dramatic increase of consumer data, facilitate the automation of the process. The following articles address this disruption in detail:
- McCurry, J., “Japanese company replaces office workers with artificial intelligence”, The Guardian, January 5, 2017.
- Balasubramanian, R., A. Libarikian, & D. McElhaney, “Insurance 2030—The impact of
AI on the future of insurance”, McKinsey & Company, 2021.
Consider Bruno who manages an underwriting team in an insurance firm. Recently, the management of Bruno’s firm informed him of their decision to create a new risk assessment team, consisting of data scientists with machine learning expertise, and reduce the size of Bruno’s underwriting team. Bruno’s underwriting team will now work with the new risk assessment team in order to determine whether to provide insurance to applicants.
Question 4
Use the model of a firm’s technology choice and graphically illustrate the management’s restructuring decision in a diagram with isocost
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